ANALYSIS: Why Ryan Reynolds invested in Alpine F1
By Mat Coch
Thursday 29th June, 2023 - 1:00pm
News that Ryan Reynolds has bought a stake in the Alpine Formula 1 team is a significant development not just for the Enstone operation, but the sport as a whole.
The investment, worth USD $219 million, valued the team at USD $900 million.
It’s a deal that is the most significant in F1 history, highlighting the soaring value of all teams.
That has been a point McLaren Racing CEO Zak Brown, among others, has been making for some time; with Formula 1 in a healthy financial position, teams are now able to build value.
F1 is now attractive for investors, with Reynolds a clear example of that, offering strong growth potential as a leading international sport.
One need only look at the franchises in other major sports, especially in the United States but also in European football, to see the potential riches.
The Dallas Cowboys NFL franchise has a valuation of USD $7.6 billion, while English football club Manchester United is worth a reported USD $5.95 billion.
While both have international appeal and recognition, they are ostensibly domestic competitions and have limitations as a result.
Formula 1, by contrast, is a genuinely international championship and the largest annual sporting competition globally.
It is able to engage with a broader audience and tap into a wide array of markets to generate revenue.
Yet despite that position within the market, the value of its teams has remained low until comparatively recently.
Previously, the sport has simply been too risky to invest in for reasons beyond a vanity project, or marketing write-off.
|November 2009||Mercedes||$ 175.70m||100%||$ 175.70m|
|October 2018||Racing Point||$ 114.62m||100%||$ 114.62m|
|August 2020||Williams||$ 200.00m||100%||$ 200.00m|
|December 2020||McLaren||$ 243.08m||33%||$ 736.61m|
|October 2022||Sauber||$ 450.00m||75%||$ 600.00m|
|June 2023||Alpine||$ 219.15m||24%||$ 913.13m|
New financial regulations have changed that equation and F1 teams are no longer the expenditure black holes they once were.
Fixed costs enshrined in the regulations enable teams to build sustainable business models and, in most instances, become profitable.
That’s without taking a longer-term view where, with rising value of the sport, teams can even afford to make a loss.
Williams is a prime case in point.
Dorilton Capital bought the team for $200 million in mid-2020.
The current market would suggest that team is worth perhaps USD $600 million today – a three-fold return on investment in just three years.
That growth easily outpaces the investment made since the purchased to keep the team operational.
While Dorilton has sunk large sums into Williams, it has certainly not spent USD $400 million – its hypothetical profit should it sell today – but even if Williams’ current owners have tipped in $300 million, it’s still looking at a healthy $100 million return on a $200 million investment – Not a bad rate of return…
It’s still an exceptional result that highlights the extreme growth phase F1 is experiencing, and is exactly what Reynolds and his fellow investors are looking to cash in on.
It’s a comparatively low-risk venture and good news for the Enstone operation’s owners, with the French brand part of the Renault-Nissan-Mitsubishi Alliance, which has been looking to shed some of the liability of its F1 involvement.
The deal means that Renault has reduced its exposure, received a cash injection into the F1 project, and opened avenues for future promotion and marketing that it would once have never dreamed of.
It’s a big win for Alpine, though not one that will immediately transform its on-track performances.
With the financial rules in place, where and when the team can spend its capital are tightly controlled, so the investment is great but cannot flow immediately into more upgrades for the car, designers and engineers, or even operational or capital expenditure.
It does offer a launching pad to maximise the investments it has made – such as a new simulator, which is due to come online next year.
Alpine is not alone on the F1 grid, with all teams are currently enjoying strong financial growth, and there is nothing especially unique about Alpine as opposed to the nine other teams on the grid.
What made the team attractive was that it was actively seeking fresh investment at a time when the sport is attractive for investors, with the promise of strong returns in the comparatively short term.
The question is, however, where on the growth curve is Alpine and F1? What sort of return can they expect?
These unknowns and depend on a range of factors, but all indicators are that the growth will continue.
Alpine is still worth only around 15 percent of Manchester United despite F1 more broadly having never enjoyed the popularity it does now.
The sport has changed its social media strategy to engage and interact with new markets, while initiatives such as the Brad Pitt/Lewis Hamilton movie will see it hit the mainstream.
On top of that are its sim racing efforts, games, television series, and more.
By embracing an array of different channels to reach and engage with fans, the sport is doing all it can to not only grow but retain its new audience.
The addition of a high-profile name like Reynolds serves only to underscore and, quite probably, accelerate that.
Reynolds is a household name, far more so than Verstappen or Hamilton, arguably even more than Alpine or F1. His has international appeal and access to a demographic that is beyond Formula 1’s traditional fan base.
With all that in mind, his involvement in the group investing in Alpine brings with it a host of possibilities both for the business and the broader sport; if F1 grows, so too will Alpine.